Latest Buffett Headlines

Monday, November 5, 2012

China’s stocks fell for the first
time in five days amid conflicting data on the nation's services
industry and before a Communist Party leadership congress and
U.S. presidential elections this week.

Jiangxi Copper Co. led declines for metal producers after a
gauge of raw materials slid by the most in a month on Nov. 2.
Kweichow Moutai Co. (600519), China’s largest maker of baijiu liquor,
sank 2.2 percent, pacing a drop among consumer stocks on
speculation sales will slow. BYD (002594) Co., an automaker, jumped 3.3
percent after after the city of Shanghai submitted a subsidy
plan for new energy vehicles to the national government.

The Shanghai Composite Index (SHCOMP) lost 0.1 percent to 2,114.03
at the close. A services purchasing managers’ index released by
HSBC Holdings Plc and Markit Economics dropped to 53.5 in
October from 54.3 the previous month. That contrasts with a
separate PMI from the National Bureau of Statistics and China
Federation of Logistics and Purchasing on Nov. 3 that showed a
jump to 55.5 last month from September’s 53.7.

“With the U.S. and China changing leadership, investors
are more risk averse,” said Xu Shengjun, an analyst at Jianghai
Securities Co. in Shanghai. “There’s much uncertainty for the
economy before the congress. Data such as the non-manufacturing
PMI is one-off and only shows that the economy is more stable,
it doesn’t mean it is going to rebound. At best, we will see a
short-term gain in stocks now, but any increase is temporary.”

Slim Lead

The Communist Party will start on Nov. 8 its 18th Congress
when 2,270 delegates meet over several days to decide on
leadership changes that will probably see Xi Jinping replace Hu Jintao as general secretary of the party that’s ruled China
since 1949. In the U.S., national and state-level data show
President Barack Obama with a slim lead in the quest for the
Electoral College votes needed to win this week’s election.
The CSI 300 Index (SHSZ300) sank 0.2 percent to 2,301.88 today, while
the Hang Seng China

Trading volumes in the Shanghai Composite exceeded the 30-
day average for this time of day by 7.2 percent, data compiled
by Bloomberg show. Thirty-day volatility in the gauge was at
16.4, lower than this year’s average of 17.2.

The Shanghai Composite has gained 1.3 percent over the past
month, narrowing this year’s slump to 3.9 percent, as reports on
manufacturing and industrial earnings signal the economy is
bottoming. The gauge trades at 9.7 times estimated profit,
compared with the 17.8 average multiple since Bloomberg began
compiling the weekly data in 2006.

Buying Opportunity

“Investors are not that much concerned about the
conflicting data,’” Daphne Roth, Singapore-based head of Asia
equity research at ABN Amro Private Banking, which oversees
about $207 billion, said in a phone interview. “If you look at
all the data, there is improvement and that’s more important. I
would take this as an opportunity to accumulate, rather than as
a signal to sell.”

Hu Deping, the son of China’s late Communist Party chief Hu Yaobang, called on leaders of the world’s most populous nation
to pursue political and economic changes on the eve of the
leadership transition. The nation’s central bank said on Nov. 2
the economy is expected to maintain “steady and relatively
rapid growth” as earlier government policies to support
expansion take effect.

The People’s Bank of China’s quarterly monetary policy
report suggests policy easing will continue and may even pick up
speed, Zhang Zhiwei, Nomura Holdings Inc.’s chief China
economist, wrote in a report e-mailed on Nov. 2.

Commodity Slump

Copper for delivery in three months lost 0.5 percent to
$7,634.75 a metric ton on the London Metal Exchange today. The
Thomson Reuters/Jefferies CRB Index of raw materials retreated
1.6 percent on Nov. 2, the biggest drop in a month. Hedge funds
cut bullish wagers on commodities by the most since June as
prices retreated to a three-month low on mounting concern that
Europe’s debt crisis will worsen and U.S. growth slow.

Kweichow Moutai, which jumped a combined 13 percent in
September and October, lost 2.2 percent to 242.92 yuan today.
Wuliangye Yibin Co.. the second-largest baijiu maker, retreated
2.2 percent to 33.69 yuan. Investors are selling shares of the
liquor makers because of speculation fourth-quarter sales may be
disappointing and on concern recent rallies were excessive, said
Wang Ping, a Great Wall Securities Co. analyst in Shenzhen.

BYD, an electric-car maker that is part-owned by Warren
Buffett’s Berkshire Hathaway Inc., advanced 3.3 percent to 15.20
yuan. Shanghai has submitted its subsidy plan for new energy
vehicles to the National Development and Reform Commission, the
Oriental Morning Post reported today, citing an unidentified
official with the local government.

Cheaper Options

The cost of protecting against losses in Chinese stocks
relative to U.S. equities fell to a one-year low on prospects
the slowdown in the world’s second-largest economy will ease.
The AlphaShares Chinese Volatility Index, derived from options
on companies listed in Hong Kong, traded at 18.61 on Oct. 31, 1
percentage point above the Chicago Board Options Exchange
Volatility Index and the smallest gap since September 2011. The
premium has narrowed from as much as 1.43 percent on Sept. 9.